In 1994, brothers David and Tom Gardner ran a struggling financial newsletter, The Motley Fool, that went out to fewer than 300 subscribers. But they dreamed much bigger--and today their dreams are reality. Their pot of gold at the end of the rainbow? The Internet. With less than $10,000 in start-up funds, then 26-year-old David Gardner and his 28-year-old brother, Tom, launched The Motley Fool on America Online (AOL) in August 1994.

Fueled by a unique blend of levelheaded investment advice and irreverence about traditional financial institutions, the Gardners suddenly became cyber superstars--and their celebrity status only grows larger as the online universe expands into more households. Today, the AOL Motley Fool forum and the brothers' Web site register close to 550,000 visitors daily, and their first book--The Motley Fool Investment Guide (Simon & Schuster)--has held steady on bestseller lists. Just how did the Fools prosper when many online ventures have flopped and many more have fallen far short of expectations? Read on for their "Foolish" advice about managing money, making it online, and building a Web site that thrills visitors.

Entrepreneur:You've been called the first cyber celebrities. Are you?

David Gardner: That's not a title we coveted. We know we are among the most popular sites on AOL, but what matters is that we are having a great deal of fun doing what we're doing, and we have a palpable sense that we are improving the lives of our readers. Every day we get messages that say "I just closed an account I'd had for 10 years with what I finally realized was a mediocre broker. The Motley Fool taught me about evaluating the performance of stocks and brokers. Thank you." It's very gratifying.

No foolin' around: Levelheaded investment advice--mixed with a healthy dose of fun--gives David and Tom Gardner (l. to r.) a daily Web readership of nearly 550,000. Entrepreneur:Were you surprised by your rapid success?

Tom Gardner: We were definitely surprised [at the time]. We were coming from a world where we were publishing a [print] financial newsletter for 250 to 300 subscribers. Looking back, however, we are somewhat less surprised. There is such a great need in the general populace for financial information that it's become one of the most compelling reasons to go online.

David: Our aim all along has been to reform, to teach, and to make it fun. There are too many sites that do one but neglect the others. And, looking ahead to whatever subjects we'll explore online, we still see our mission as amusingly teaching and reforming.

Entrepreneur:Your sites aren't technically demanding. Is that by design?

David: We want to create sites that anyone with acomputer and modem can access without much irritation. We asked ourselves do we want to serve only people with the latest, greatest computers, or should anybody be able to reach us? We went with the latter approach, and it has only benefited us.

Tom: To the extent that we created our success, it's due to David's recognition that the medium is text-based. People enjoy reading, and 10 years from now computers--however they are networked--will still include the written word. At the time we launched in August '94, many people were excited about the technical bells and whistles. Now across the Web, you see people moving away from the frills and into the development of chat rooms, message boards and other communication tools rather than putting up a lot of whirling Java applets.

Entrepreneur:A factor in The Motley Fool's success is that you began your association with AOL at a time when it was seeing terrific growth. Did you deliberately choose AOL as opposed to, say, Prodigy?

Tom: In the spring of 1994, we made ourselves very familiar with online services. We were looking for one with a general focus as opposed to, say, one that primarily concentrated on business, such as CompuServe. So our decision really was between AOL and Prodigy. At that time, there was a lot of financial discussion online that focused on low-grade promotional companies, penny stocks. It didn't strike us as a good idea that people should be encouraged to invest in companies they didn't know. We took that concern to Prodigy and AOL. Prodigy responded that it didn't manage or moderate its bulletin boards. AOL, by contrast, took a serious interest in monitoring what went up online. So AOL told us to build a site that exercised some control; not censorship--we don't censor, but we do manage conversations so they don't get out of control. That was a main reason we went with AOL.

Entrepreneur:Why did you go online in the first place?

David: Because it's a cheap way to reach a mass audience. To start The Motley Fool took two computers and two people willing to spend their time hacking away on them. Our start-up costs were south of $10,000.

Entrepreneur:You no longer have an exclusive contract with AOL, right?

David: Actually, we never had an exclusive contract in regard to the Web. Our contract restricted us from going on other commercial services, but we lost little sleep over that. Our point of view is that being on AOL is great: It has 8 million customers and is growing. Our other focus is our Web site, which has almost as many readers as our AOL site. Being on AOL and the Web means we are available to anybody online.

Entrepreneur:What about the future of The Fool on AOL vs. the Web?

Tom: To use a retail analogy, The Motley Fool is trying to be an anchor store in every mall. We have two sites, and we've also syndicated our content to Yahoo! and USA Today's Web site. If we're going to keep our service free--and that's our intent--we need to build traffic as high as we can to generate advertising revenues. We'll look at relationships with any online service in terms of providing content.

Entrepreneur:While most Web site operators talk about "viewers" or "users," you two say "readers." Why?

Tom: We should probably say "participants," but what goes on at The Motley Fool every day is similar to what goes on in a library. People are there reading and, in some cases, writing. About 50 percent of our new content every day is generated by our participants. While we have a talented staff of writers, in terms of our online forum, we are very little without the contributions of readers and the quality of the ongoing conversations that result.

Entrepreneur:How has being a small venture benefited The Motley Fool?

Tom: A benefit of being a small company is we haven't had the resources to make big mistakes. Much larger media companies have. They try to create something too big before seeing if people want it.

We started with 100 people using our site. We got to know them and collected ideas from them. Because of that experience, we have never wanted to go out and launch something on a large scale without first getting a lot of feedback. Our aim isn't to create a glitzy, splashy site. It's to give people what they are asking for and want to be a part of.

Entrepreneur:A big theme in the new computerized economy is "disintermediation," the elimination of middlemen. Is that happening to traditional brokers in the finance realm?

David: We've been disinterme-diating traditional financial institutions for three years. When we began, we looked at Wall Street, and what we perceived was a huge world that had gotten rich managing other people's money because people didn't know what to do with their money. There was no incentive for the institutions to teach them. If they taught them, people would stop paying fees. Wall Street has many such conflicts of interest, where its interests are not fully aligned with the customers it is serving. That's why it's both easy and powerful to teach people about investing.

Entrepreneur:Some financial analysts say that in the current bull market, The Motley Fool isn't "foolish" so much as bull. Clever as that pun is, it's saying that your advice works only because the market continues in an upward push.

David: Yes, some critics say The Motley Fool is a creature of the bull market. And we're delighted there's been a bull market, but what we teach is to measure your performance against the market average, whatever it is. That's the only yardstick of success. From the beginning, we've posted a real-money portfolio of stocks we own. Since the launch, our portfolio is up 144 percent. The
Standard & Poor 500 is up 72 percent for the same period.

Tom: Remember, too, that we're bullish about stocks--but we're bullish about stocks over a 30-year period. Few people in investing take the long view. So much of Wall Street concentrates on short-term, quarterly performance. We don't. That said, we frankly expect there to be bumps in the road. But we also believe that stocks have proved to be this century's greatest investment vehicle, appreciating 11 percent per year, and we expect the same in the 21st century, with full recognition that there will be years where you may lose 30 percent of your money.

David: We discovered Iomega from our own message boards--reading what our readers wrote--and it went on to become our best performing stock in 1995. It had a roaring '96. Then some of the older media elements, ones that had long provided information to investors, felt threatened by our new mode of delivering financial information. And they began writing about "online stock hyping."

It was often said in the press that online discussion was driving Iomega's rise as the most actively traded issue on Nasdaq. The upshot is, the Iomega stock became a phenomenon in itself.

Entrepreneur:Isn't the antidote to the worries about stock hyping on message boards that the messaging medium is so dynamic and filled with arguments that it overwhelms most efforts at hyping?

David: I completely agree. But some of the financial media--the ones that feel threatened by the online world--like to spout worries about hype. They ignore the self-policing aspects of online message boards because, frankly, many have never been online and don't understand message boards.

Entrepreneur:Is The Motley Fool's strategy to hunt for appreciating stocks in smaller companies, the so-called "small caps" that have won so much recent attention?

David: The Fool loves investing in small caps, but the Foolish approach is to mix large and small companies in a portfolio. And we advise starting out with large stocks--companies whose products and services you know and trust. We don't advise loading up on small caps in this bull market--even though many analysts say we do. We do champion small cap investing but only when it is part of good, overall portfolio management.

Entrepreneur:How can a small public company bring itself to the attention of The Fool?

David: If we already have a message folder open on it--and there are many on companies of all sizes--our advice is to get involved and answer reader questions. Several investor relations professionals are already actively doing this. They're pioneers, and they understand that the online medium is in the service of truth and accountability. Tell untruths, and they will come back at you because you are on record--everything ever posted on The Fool boards is still there to be read.

If there isn't a folder, just get involved on the general boards. Too often, investor relations comes down to a voice menu at a phone number: "Press 1 for an annual report." When you post a message online, however, thousands of people will read it. That's the way to build awareness, and online, it can happen very, very quickly.

Tom: Our next book, in fact, is about personal financial management. That's how we see The Fool expanding: by pursuing logical extensions of the brand, both online and off. But we'll keep whatever we do both informative and fun. That's what gets results today.